Exclusive| Freight jumps 3x to $15/bbl, insurance up to 3%; shipping shock hits energy flows

Shipping markets have entered a phase of extreme volatility. Very large crude carriers (VLCCs) are currently earning about $135,700 per day, while Suezmax rates stand at $124,500 per day and Aframax vessels at $143,300 per day, according to Rystad Energy. The highest single fixture has reached $215,775 per day, while at peak levels, VLCC earnings on the Middle East–China route surged to $700,000 per day.

Freight costs on key long-haul routes have also spiked. The US Gulf–China route rose from $4.60 per barrel in January to around $15 per barrel by early March, more than tripling logistics costs for transported crude.

Rising Insurance premiums

Insurance premiums have risen in tandem. War-risk cover has increased from about 0.1% of hull value to over 1%, with some quotes reaching 3%, pushing single-voyage insurance costs to $1.3–3 million for a $130–150 million tanker. “War-risk premiums… have skyrocketed by 200–300%, with some extreme cases seeing a 1,000% increase,” said Fotios Katsoulas, Director for Tanker Freight and Alternative Fuels at S&P Global Energy.

The combined effect of freight and insurance escalation has pushed up India’s landed energy costs. The average Indian crude basket has surged from $69 per barrel in February to $113 per barrel in March.

Supply-side disruptions are compounding the pressure. Data from Rystad Energy shows Middle East crude flows to India dropped from about 3.06 million barrels per day in February to 1.22 million barrels per day in March, a decline of nearly 60%.

The Strait of Hormuz typically carries around 14 million barrels per day of crude, of which 12.2 million barrels per day are destined for Asia, including roughly 2 million barrels per day for India.

LPG supplies under strain

Liquefied petroleum gas (LPG) supplies are facing the most immediate strain. Nearly 90% of India’s LPG imports transit through the Strait, and the country accounts for about 50% of Gulf LPG exports routed through it. “India is facing a major shortage… this has already led to queues at distributors and concerns over domestic cooking gas supplies,” Katsoulas said.

Liquefied natural gas (LNG) flows are also under stress. Around 85.7 million tonnes of LNG annually — equivalent to about 320 million cubic metres per day — normally pass through the Strait. “Qatari LNG supplies have dropped by over 300 million cubic metres per day since early March,” he said, adding that this is causing “significant stress for gas-reliant industries.”

Shipping availability has tightened sharply, with around 1,000 merchant vessels stuck in the Persian Gulf and mainstream shipping lines withdrawing from high-risk routes. Vessel transits through the Strait have dropped by more than 90%.

Supply timelines are extending as vessels reroute via the Cape of Good Hope, adding weeks to voyages. “Atlantic Basin replacement barrels… generate approximately 50% more tonne-miles per voyage,” said Erik Grundt, Senior Analyst at Rystad Energy, pointing to longer delivery cycles and higher fuel costs.

To maintain supply, refiners have relied on unsanctioned “shadow fleet” tankers. “These vessels… allow for ‘delivered’ trades that bypass mainstream G7 financial systems,” Katsoulas said, though he cautioned that these channels are “increasingly unreliable.”

While India has diversified crude sourcing, reducing dependence on the Strait to about 30%, alternatives remain constrained. Pipeline routes in Saudi Arabia and the UAE offer limited bypass capacity, and US LPG export terminals are operating near maximum throughput.

“Supply continuity can be maintained… but it comes with a structurally higher delivered cost base,” said Bhavik Vora, Partner at Grant Thornton Bharat.

With freight, insurance and supply disruptions converging, India’s energy imports are entering a phase of elevated costs, longer timelines and tighter availability.